NEWS | Sunday, 22 July 2007

Reduced commission sends travel agents to court

Gerald Fenech

As the weather continues to heat up, a war of attrition appears to be brewing up between local travel agents and two established airlines on separate cases of heavily reduced commission and misleading price advertising.
The President of the Federated Association of Travel Agents (FATTA) told Malta Today that the association has two separate grievances with British Airways and Lufthansa with both cases having now ended up in court.
“In the case of British Airways, the airline suddenly decided to reduce the commission paid to travel agents to a miserly 1 per cent which is definitely not worth continued operations. When you consider that in its heyday, BA used to pay up to 9 per cent commission and most airlines pay standard 4 per cent these days, you have an idea how this profit margin is unsustainable”.
Tonna explained that commission is paid on the portion of the flight that excludes what the airlines classify as taxes so for example, if a flight to London costs Lm 35 excluding taxes, the only commission due to a travel agent for every passenger is a miserly 35c.
“We have a legally binding commercial agreement with the International Air Transport Association (IATA) wherein it is clearly stated that an agent has a right for commission and/or remuneration for service rendered to the airline in question. It is pretty clear that BA have reduced commission to 1 per cent just to fulfil their international obligations as if they could, they would definitely do away with it altogether”.
It seems that the commercial agreement between the IATA accredited Agents and the IATA member airline imposes various legal obligation both on the travel agent and the airline under the responsibility if IATA.
Some airlines have been abusing of their position and breaching certain provisions in the contract to the detriment of the travel agent, and IATA, who should be responsible for the management of the Passenger Agency Programme, has remained impassive.
An IATA agent has to meet all IATA established criterion before it is accredited, that is licensed to perform such services on behalf of IATA member airlines, and has to comply rigidly with the obligations set out by IATA.
The agent is contractually obliged to comply with numerous conditions laid out in the contract such as including rigorous financial and agency criteria. Such conditions do not only apply to the sale and issuance of air tickets but also, but also oblige agents to collect airport charges on behalf of all the airport management companies, all local and foreign Government taxes as well as fuel surcharges and any other services or legal obligations which the airline passes onto the travel agent via this agreement.
FATTA’s president explained that Lufthansa’s case is different. Lufthansa still gives commission on the basic fare to the agent under the contract but at the same time is promoting the net fares directly to the consumer via their website.
“Lufthansa promote cheaper prices on their website and whilst this could sometimes appear to be beneficial to the consumer, Lufthansa is blatantly breaching the commercial agreement it has with the travel agents and is considered to be acting in direct unfair competition with its appointed distributors.
This makes the travel agents look as if they are charging more for the same route when in actual fact this is absolutely not the case. It actually looks like the airline expects the consumer to pay the agent’s commission for the contractual services being renedered to the airline under an agreement to which the consumer is not even party. In our opinion this could only be interpreted as being unfair trading and verges on the limit of misleading advertising”.
FATTA does not object to any other selling channels so long as the rule of Fair Trading is respected and there is a fair level playing field on the market.
Tonna said that FATTA had first filed two separate judicial protests in court against both airlines in an attempt to regularise the situation but airlines failed to respond and FATTA was left with no alternative but to pursue further legal action. FATTA is also insisting that, under the terms of the contract, commission should be paid on the full fare, excluding only any local or foreign Government imposed taxes such as the Lm10 local departure tax . All other charges that are commonly referred to as taxes are in actual fact not taxes but airport charges and so on, which are collected by the travel agent on behalf of, and remitted via the airline.
The agent seems to have become more of Tax and other Charges collector rather than a source of distribution offering the consumer non-discriminatory access to air fares and other ancillary services.
When contacted, British Airways said that they preferred not to comment on a case which is currently in court.

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